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Bah Humbug! Holiday Hopes Are Too High for Retailers

With the first big purchasing push of the holiday season now officially behind us, it seems the one thing that’s clearly in high demand this season is the Christmas barometer. As in, the kind of gauge that measures morsels of data and other indicators to give us a sense of how things are going out there in the land of the free.

Contrary to more rosy consensus views, at least one veteran observer says things aren’t going to be that good for retailers this Christmas.

“At the end of the day, I think we all look at this economy and say, ‘How strong can Christmas be against a backdrop where job growth is still fairly mediocre, GDP growth is still fairly sluggish, and you’ve had this recent shock to confidence?’” says Nick Colas, market strategist at ConvergEx Group, a global brokerage company based in New York.

His own prediction is for about one to two percent sales growth this season, which is significantly lower than a widely shared outlook from the National Retail Federation for almost 4% improvement.

“We’re questioning how realistic the 3.9% really is,” Colas says in the attached video, especially since this is as short of a shopping sprint as the calendar can permit.

His lower than expected forecast is predicated on the fact that five of the ten pre-season data points he tracks fell into the negative column, while four were positive and one was neutral. It’s not terrible, he says, but more lukewarm.

Among the positives factors, Colas cites recent data on individual spending and income.

“Both of those numbers are rising for the third quarter, anywhere from two to four percent,” he says. “So on the fundamentals as to how much money people have (to spend), those numbers do look a little bit better.”

But hold your reindeer, Santa. Colas also points out the dark cloud that came over the economy in October in the form of diminished consumer confidence in the face of the budget showdown in Washington and the government shutting down.

“So the worry would be that folks do have money to spend, but they feel a little bit less certain about their outlook, so they’re not going to spend quite as much,” Colas reasons, adding that credit card spending might also reflect this uncertainty, and cause people to think twice before reaching for the plastic to pay.